Retention Challenges and Productivity Gains: A Case Study of Employee Turnover in Vodafone UK

Introduction

The aim of the proposed study is to investigate the impact of employee turnover on organisational productivity with a focus on Vodafone UK. Employee turnover refers to the rotation of employees around the labour market: between jobs, firms, occupation, and between states of employment and unemployment (Abolade 2018). Employee turnover can also be defined as workers leaving a company for voluntarily or involuntarily when they are laid off by their employers, which is a critical issue that can be addressed with the right UK dissertation help (Rijamampianina 2015).

Vodafone was incorporated in 1984 as a subsidiary of Racal Electronics Plc. Vodafone became an independent company in 1991. The company employs more than 11,000 employees in the UK (Vodafone UK 2019). Over its operational period, Vodafone has lost some of its employees through either voluntary turnover or involuntary turnover thus an effective case study for the proposed study.

Background of study

Employee turnover is inevitable across organisations regardless the sector they operate in. when employee turnover occurs, human resource managers incur extra costs necessary for conducing exit interviews, starting a search procedure, and replacing the lost employees (An 2019). In the same vein, Langbein and Stazyk (2018) write that employees are a valuable asset for any organisation as they inform, shape, and implement strategy which implies that employee turnover significantly affects organisational productivity. As such, employee turnover has been considered as an organisational occurrence that should be minimised given its significant costs to companies. Nonetheless, employee turnover remains a major challenge facing business organisations (de Mesquita Ferreira and de Aquino Almeida 2015).

The relationship between employee turnover and organisational performance has been widely researched by human resource practitioners, academics, psychologists, and consultants. In the current knowledge-based economy, employee turnover has even gained more attention given the challenges that come with the shift to this economy (Langbein and Stazyk 2018). Traditionally, turnover was assumed to create significant organisational due to social and human capital depletion as well as operational disruptions: turnover was therefore deemed to affect organisational productivity negatively (De Winne et al. 2019). However, recent studies has provided contrasting information; for example, Hancock et al. (2017) establish that organisations benefit from small amounts of turnover as there is a decrease in labour costs and influx of new ideas. The study is keen to note that beyond a certain turnover point, organisational performance declines as a result of turnover costs outweighing its benefits. Similarly, Hancock et al. (2013) argue that the existing literature emphasises the negative role of employee turnover on organisational performance without sufficient empirical or theoretical support. Such studies posit that employee turnover may be beneficial to organisations seeking to improve their productivity. In light of this mixed evidence, several authors have called for more research into the relationship between employee turnover and organisational performance. On the basis of these contrasting perspectives and call for more insights, the proposed study offers empirical tests for the actual effect of employee turnover on organisational productivity in Vodafone UK Ltd.

Statement of the problem

The problem that prompts this study is different perspectives on the effect of employee turnover on organisational performance which calls for more insights into the relationship between these variables. Traditional studies agree that employee turnover has a negative effect on organisational performance due to the costs incurred in hiring and training new employees (Langbein and Stazyk 2018). On the contrary, contemporary studies suggest that small amount of employee turnover has a positive effect on organisational performance in that new employees have novel ideas while losing some employees cuts labour costs (Hancock et al. 2017; Hancock et al. 2017; and Hom et al. 2017). By investigating the impact of employee turnover on Vodafone’s performance, the proposed study will heed to the call to offer more insights thus contributing in researchers’ efforts towards a common perspective.

Objectives of the study

The general objective of the proposed study is to investigate the effect of employee turnover on organisational productivity in Vodafone, Salford Store. To attain this objective, the following specific objectives will guide the study:

To investigate the effect of turnover on labour costs

To explore the influence of employee turnover on operational efficiency

To test the inverted U-shape relationship between turnover and organisational performance in Vodafone Salford

To investigate the role of employee satisfaction in turnover

To establish the role if motivation in controlling employee turnover

Research questions

What are the negative effects of employee turnover on organisational productivity?

What are the positive effects of employee turnover on organisational productivity?

Research hypotheses

H1: Employee turnover has a negative effect on organisational productivity

H0: Employee turnover has insignificant positive effects on organisational productivity

Significance of the study

The proposed study sheds more light of the relationship between employee turnover and organisational performance while heeding to the call for more works on this topic. De Winnie et al. (2019) state that there is need to investigate the impact of employee turnover at an organisational level a call which the proposed study heeds to by investigating the impact of employee turnover at Vodafone UK. The study will also contribute to the new perspective of the positive effect of employee turnover on organisational performance.

Review of related literature

Employee turnover brings operational disruption to an organisation Langbein and Stazyk (2018) by interrupting processes and placing extra responsibilities to the remaining employee (Abolade 2018). From the human capital perspective, aggregate labour turnover lowers organisation-specific human capital thus affecting the production process (An 2019). Similarly, de Mesquita Ferreira and de Aquino Almeida (2015) note that through employee turnover, an organisation loses skills, knowledge, and memory thus lowering organisational productivity. In addition, employee turnover has been negatively associated with the development of the organisation social capital (Langbein and Stazyk 2018). Further, employee turnover affects output levels, consistency, quality, and customer services resulting in a loss in organisational productivity. In the same vein, Hausknecht and Holwerda (2013) found out that aggregate employee turnover has a negative association (ranging from -18 to -24) between employee turnover and organisational performance.

Nonetheless, functional employee turnover has been positively associated with organisational performance. According to Hancock et al. (2017), an organisation benefits when poor performers quit or are laid off but this is only factual when replacement costs are low and the performance of the new employees is above average. Likewise, Hancock et al. (2013) argue that new employees are beneficial to an organisation as they give rise to socialisation through networks and relationships. Further, Hom et al. (2017) note that employee homogeneity is disrupted by turnover resulting in an increase in organisational productivity. Still, Park and Shaw (2013) posit that low employee turnover rates create inertia in an organisation thus providing an opportunity for employee training and development to further promote organisational performance. In agreement, Lee (2018) writes that new employees bring innovation, new ideas, and paradigms to the organisation, which commensurate higher organisational performance.

Employee satisfaction

Many studies have shown that satisfied employees have lower turnover intentions while the more employees feel dissatisfied, the higher the risk of leaving the organisation (e.g. De Gieter and Hofmans 2015). This negative relationship has been founds for different employees in relation to the financial and emotional support they receive at the workplace. However, most of these studies focus on financial rewards but the few that address the alternative material and psychological rewards types establish the same logic that the higher the level of dissatisfaction, the higher the risk of leaving the organisation (Thomas et al. 2017). Drawing from reciprocity and social exchange theories, organisational support to employees should cause the workers to feel the need to remain in the organisation to as to respond to the support (Kurniawaty et al. 2019). From this perspective, employees have no or low turnover intentions when they receive support from the organisation (Kurniawaty et al. 2019). Thus, organisations should support their employee in order to strengthen employees; sense of belonging to the organisation, which significantly lowers turnover intentions.

Employee satisfaction is affected by various factors including individual characteristics, situational variables, and job characteristics and if any of these is missing, employees are likely to have intentions of leaving an organisation (de la Torre-Ruiz et al. 2019). On the other hand, Kabungaidze et al. (2013) establish that security, opportunities for advancement, good management, wages or salary, supervisors and supervision, working conditions, communication, and intrinsic factors of work affect employee satisfaction. In the same vein, Kuo et al. (2014) note that the more aspects of the work in relation to individual wishes, the higher the level of satisfaction and the lower the turnover intentions and vice versa.

Customer satisfaction

Recently, research has revealed a relationship between employee satisfaction and customer satisfaction (Wolter et al. 2019). Inherent to this relationship is that organisations’ investment to enhance employee satisfaction spill over to customers and positively influence customer satisfaction. From this association, Wolter et al. (2019) state that employee turnover has a negative effect on customer satisfaction. Similarly, Hogreve et al. (2017) establish that service customers have their preferred employees within an organisation and if such an employee leaves the organisation, the firm risks losing the customers that preferred the employee. According to the emotional contagion theory, satisfied employees express positive emotions, either non-verbally or verbally, which are contagious to customers resulting in increased customer satisfaction Peters and Kashima (2015). Likewise, Mende and Van Doorn (2015) write that the actions of employees are reflective of their emotional state while customers inherit these displayed emotions. Therefore, satisfied employees interact positively with customers increasing repurchase rates, which increases organisational performance and vice versa.

Theoretical framework

Research into the relationship between employee turnover and organisational performance identifies three types of models namely a linear negative relationship, an attenuated negative relationship, and an inverted U shaped relationship (see figure 1).

The linear negative relationship primarily emanates from the human capital theory (Park and Shaw 2013) but is also supported by economic-based perspectives (Hausknecht and Holwerda 2013). In the same vein, Langbein and Stazyk (2018) note that employee turnover incurs losses in productivity which supports the linear negative relationship. Similarly, An (2019) establishes that replacement costs, separation, social capital loses, and human capital loses counter the functional effects of turnover thus supporting the linear negative relationship between turnover and organisational performance. Other studies propose there is a curvilinear relationship between employee turnover and organisational performance (Hausknecht and Trevor 2011). The curvilinear model suggests that beyond a certain point, small increments in turnover rates have a minimal effect of organisational performance (Shaw 2011). When employee turnover rates are low, organisational and individual investment takes time to yield to firm-specific human capital (Rijamampianina 2015). The ability of new employees matching previous performance levels is quicker thus the impact of organisational performance is attenuated. However, high employee turnover rates offers more evidence for the attenuated negative relationship. Rijamampianina (2015) posit that given the high cost of reducing employee turnover, organisations should always strive to have an optimal level of turnover above zero, which calls for research examining the costs and benefits of employee turnover so as to determine an optimal range. An (2019) argues that the total turnover cost is the aggregation of retention costs and the costs of turnover which results in an inverted U-shaped relationship. According to this model, turnover is likely to affect both high and low performers rather than just average performers. However, Shaw (2011) posit that the inflection point shifts depending on the circumstances of individual organisations.

Hierarchy of needs theory

The application of Maslow’s hierarchy of needs theory in promoting employee retention has been studies by academics and practitioners. In organisations, employees’ physiological needs can be met by providing proper working conditions and fair financial compensations systems (Hanif et al. 2013). According to Jerome (2013), people find jobs in order to fulfil their physiological needs thus matching job roles and employee interests is an effective way of lowering turnover intentions. In the second hierarchy, organisations can appeal to employees’ safety and security needs by providing insurance, fringe benefits, and health plans; such offers help employees feel supported to cope with their emotional needs resulting in increased desire to work in the organisation (Hanif et al. 2013). Belongingness needs can be fulfilled through forming working relationships with managers, supervisors, and peers (Jerome 2013). Organisations hold various events such as sports, luncheons, cross training and common rooms among others in order to help employees develop social ties. Employees with a sense of belonging to an organisation are less likely to leave the organisation (Hanif et al. 2013). Self-esteem needs can be fulfilled by making employees feel respected and recognised (Akhir et al. 2018). By recognising the efforts of individual employees and respecting their commitment to organisational goals, an organisation can build the esteem of its employees lowering the likelihood of the employees leaving the organisation (Hanif et al. 2013). Self-actualisation needs of employees can be fulfilled by helping an employee realise his/her full potential which can be attained through training and development as well as setting challenging goals and supporting the employee to achieve those goals (Akhir et al. 2018). Supporting an employee to attain self-actualisation creates a feeling that the organisation is concerned with the growth of employees thus helping employee remain loyal to the organisation (Hanif et al. 2013). Therefore, satisfaction of the five level of needs as categorised by Maslow leads to employee motivation and productivity, which improves organisation performance while lowering turnover intentions.

Two factor theory/hygiene theory

Herzberg’s two factor theory identifies and analyses the factors for employee satisfaction as well as the factors for dissatisfaction. Given that factors for employee dissatisfaction has a direct effect of employees’ thought on turnover (Yusoff et al. 2013), Herzberg’s two factor theory is appropriate for this study. In addition, Herzberg’s two factor theory covers extensive factors that promote or demote employee turnover rate thus an appropriate choice for this study. Herzberg’s motivator factors have been identified as an effective tool for lowering employee turnover intentions (Alshmemri et al. 2017). A study conducted by Hyun and Oh (2011) reveals that motivation and hygiene factors are important in the workplace, in particular, the study establishes that motivated employees demonstrate greater creativity and efforts in their work resulting in higher organisational performance. In addition, the study establishes that when a company is able to balance the motivation and hygiene factors, employees are less likely to have turnover intentions. Another study conducted by Yusoff et al. (2013) reveal that motivational factors such as high salaries promote employee satisfaction while lowering turnover intentions. The study also establishes that hygiene factors contribute to good working conditions, which promotes employee retention. The study adds that recognition helps employees feel appreciated which increases their commitment to the organisation. These two studies provide evidence that Herzberg’s two factor model lowers employee turnover intention while increasing organisational productivity.

Research methodology

The proposed study will adopt the positivism research philosophy. According to Saunders at al. (2015), positivism relates to working with observable social reality in order to produce law-like generalisations thus providing accurate knowledge. The researcher will use existing theory to develop hypotheses which will then be tested through this study. As already established in the literature review chapter, it is anticipated that employee turnover has a negative effect on organisational productivity. Though this is the expected outcome, the researcher will remain neutral and detached from research and data in order to avoid influencing the study outcomes.

Using a deductive research process Johnston (2014) the research design will take the survey strategy to collect qualitative data through the use of a semi-structured interview. The population for this study is people working in the human resource management department in Vodafone but given time constraints, all these cannot be interviewed thus a sample will be selected. The purposive sampling techniques will be adopted to select the study sample. The human resource management personnel are deemed the most knowledgeable to answer the research questions given they are responsible for handling human capital in the company thus have an understanding on how turnover rates affect organisational productivity. Based on the title and job roles, a sample of 6 participants will be selected and interview sessions scheduled with each subject. Every interview session is scheduled to last between 20 and 30 minutes and the day will be scheduled based on the availability of individual respondents. During every session, the order in which questions will be asked will vary depending of the established level of rapport. In some cases, some questions could be omitted and others added to probe more insights. Notes will be taken and recordings made during every session. Descriptive analysis will be adopted as the data analysis method. However, the data will be organised into common themes that will helps answer the research questions while providing insights to meet the study objectives.

Ethical consideration

Research ethics can be defined as the use of appropriate behaviour in relation to the rights of the study subjects so that the participants are not harmed in the research process (Saunders et al. 2015). Research ethics in this study will relate to how the research topic and objectives are formulated and clarified, how access will be gained, how data will be collected, and how data will be stored and reported all seeking to ensure the research is conducted in a moral way. The privacy of study participants will be upheld by ensuring that personal information and other identifiable information is not included in the findings. In addition, the study will require voluntary participation: once the respondents are identified, they will be given the freedom to choose whether to participate in the study or not. They will also have the right to withdraw at will or leave out questions they might not be comfortable to answer. Further, informed consent will be sought where respondents will be required to give written or verbal consent depending on the medium of communication used for each. Finally, the confidentiality of data provided by the participants will be maintained through storage in password-protected files and computers while storing the notes taken in locked cabins. These files and notes will be permanently destroyed after data analysis and approval of the research paper.

Limitation of the study

The study will collect data from a small sample of 6 persons, which implies that the findings cannot be generalised to all organisations. The study will also collect data from employees in the same department which limits the generalizability of the findings to the entire firm. Further, only a single company is studied thus the findings cannot be generalised to the entire communications sector. Moreover, the study will use general turnover data which includes voluntary and involuntary turnover which means that the finds will not determine which type of turnover has a high effect on organisational performance. For future studies, this study suggests more insight into the topic while considering the effect of both voluntary and involuntary turnover of organisational performance.

Chapter outline

The study will be organised into 5 chapters including introduction, literature review, methodology, findings and discussion, and conclusion and recommendations. The introduction chapter will provide background information, identify the problem that the study addresses and the contribution the study makes to existing literature. The literature review chapter considers previous related studies in order to clarify the research gap and refine the study hypotheses. The methodology chapter discusses the study design, sampling techniques, data collection instruments, process and procedures as well as consideration of research ethics. The fourth chapter presents the collected data and analyses it according to the study objectives. The conclusion chapter summarises the study findings and makes recommendation not only to Vodafone but to other organisations in the business environment.

Gantt Chart

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